Society needs banks to help absorb and mitigate the economic impact of the pandemic.

Months of forced closures and layoffs have devastated economies. In the mean time, banks have done important work with governments to manage stimulus programs, and with regulators to limit unintended consequences of the crisis such as new credit drying up.

Sometimes, looking at the signs in the banking sector, I get the feeling we’ve been here before. There are key differences though.

Back in 2008, the banks were cast as the villains who had caused the crisis. Now, banks can play the part of heroes.

Another difference is that banks are in a much better place this time around to respond to customers. Tighter governance and liquidity requirements have given banks the resilience and breathing space to respond to current circumstances much better than they could have 12 years ago.

I have spoken about how banks need to balance the need to cut costs and increase efficiencies in the face of the sudden lack of revenues.

Retail and commercial banks must be objective and analytical about how they view credit, and they need to be creative and far-sighted so that they can manage their own risk and still operate for the benefit of South Africa as a whole.

For banks to be seen as heroes they need to operate with clear regulatory guidance on collections and recovery.

They will need to treat borrowers fairly and be clear-sighted about the situation their customers find themselves in.

I’ve written about this elsewhere, but it is worth repeating: the opportunity for banking is to be purpose-driven. Banks traditionally make money by selling banking products and services. But by focusing instead on proactively helping their customers manage their money better, banks can be true to their purpose – and in the process, our analysis shows, they can expect up to a 9% increase in revenue. This is truly doing well by doing good.

In my last article I wrote about the phases we expect the credit crisis to move through. The first phase is nearing its end, as governments wind down their stimulus packages. The next phase will be a new demand for private capital provision, and that will lead us into the third phase where banks re-look at how they structure their equity.

Banks will serve as a bridge to smooth the transitions between these three phases of the credit crisis. In that way they help economies avoid even more disruption.

This pandemic has tested every part of the system. If there were weaknesses in supply chains, or in e-commerce systems, or breaks in leadership or weaknesses in strategy, this crisis has exposed them. But the opportunity is for banks in particular to rise to the challenge we face as a society, as an industry and as a country, and be the heroes once again.

How well do you think the banking sector will respond to this crisis? Do you think we have what it takes? I am always interested to hear your thoughts. You can mail me at Jigyasa.a.Singh@accenture.com. To find out more about how being purpose-driven can increase your revenue by up to 9%, please read my other blog entries or read the report by clicking here.

 

Jigyasa Singh

Jigyasa Singh

Managing Director – Financial Services, Africa

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